Recession Batters Plans for New-Product Launches

CHICAGO (AdAge.com) -- Another sign of a tough economy: a lot fewer new-product introductions. According to Mintel, new food and beverage product launches fell 51% to 2,660 during the first quarter of 2009 compared with the same period a year ago, taking a bite out of potential ad spending.

"Faced with low consumer confidence and reduced spending, many food and beverage manufacturers cut back on product development and new-product launches," said Lynn Dornblaser, director-consumer package goods insight at Mintel, a research firm. "Many companies face internal budget cuts that affect everything from new-product ideation to development and marketing."

Ms. Dornblaser added that Mintel has tracked new products during three major recessions, and there is typically a decline in launches at the beginning of a recession and a sharp uptick upon signs of a recovery. Mintel underscored, however, that this year's drop was particularly significant, as it comes on the heels of a 32% decrease in all product launches during the first quarter of 2008.

Perhaps that's because the recession began in December 2007, according to the National Bureau of Economic Research. Matters, of course, became worse in early 2009.

Some categories were worse than others. The biggest drops were in non-alcoholic beverages, down 56%; chocolate, sugar and gum confectionary, down 55%; and dairy products, off 60%. Confectionary may have been disproportionately affected as Easter fell in the second quarter this year.

New-product launches have also been slipping in recent years as manufacturers focus resources on quality over quantity. Grocers are increasingly promoting their own house-branded products in store and the number of brand-name products in stores is universally expected to decline in the coming years.

Ms. Dornblaser did note, however, that while the decline in new-product launches was particularly troubling in January and February, they began to increase in March. "Consumer confidence has leveled off for the time being, which marks an opportunity for manufacturers," she said. "Now is the time for ideation and innovation for products that answer shoppers' desires for value, quality and pleasure."